Boart Longyear Could Net $600 Million from Products Unit Sale

By David Winning

Investors in Boart Longyear must be hoping that every cloud has a silver lining after a particularly stormy year.

The Utah-based specialist in drilling services and products to the mining industry recently cut its earnings guidance for the second time in just three months, laid off around 1,800 workers globally and shut a Perth manufacturing plant. The restructure came after the board ousted Chief Executive Craig Kipp in October.

Based on the multiple that GE paid to acquire Industrea Goldman Sachs analyst Chris Savage says the enterprise value of Boart’s products division could exceed US$600 million. That roughly puts it on a par with the current 613 million Australian dollar (US$641 million) market value of Boart Longyear as a whole.

Boart Longyear has historically argued that providing both drilling services and drilling products gives it an edge over competitors, particularly in drilling products because of the feedback it gets from other parts of the business, Mr. Savage says.

While this may be true, it could equally be that Boart is at a competitive disadvantage because the largest customers of drilling products are also its largest competitors in services, he says.

“In the event of a sale of the products division and assuming a price is generated close to our estimated enterprise value, the company would be able to repay a significant amount of debt and be in a net cash position,” Mr. Savage says.

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